Why Local World is a beacon of hope for regional newspapers

Today's extract from the second, updated edition of the book about local journalism What do we mean by local?* is by Neil Fowler, former editor of three regional dailies and one of the book's co-editors.

He has long argued for radical action to secure a future for regional and local newspapers. Here he outlines why he thinks a new publishing group may fulfil his hopes.

In the last 10 years there has been precious little good news about the regional and local newspaper industry. True, in the mid-2000s there was still plenty of acquisition activity; share prices of the quoted businesses were still riding high; margins were bordering on the ridiculous; and morale amongst the troops was pretty good.

But it wouldn't have taken much digging below the surface to discover that it was a huge bubble waiting to burst. Sadly that digging never took place. So, when the bubble did pop, denial of responsibility took front stage while leaving one almighty mess.

This resulted in jobs going and titles closing, with retrenchment being the main order of the day/month/year. Most commentators wrote off the sector like some old dairy cow being sent off to the knackers' yard. Nice when it was around, but not quite the right thing for the 21st century, old boy.

After the deluge of bad news over such a long period, November 2012 saw the first sighting of what may be a new dawn for the industry.

Sadly, the announcement that David Montgomery was establishing Local World to take over the assets of Northcliffe Media and Iliffe News & Media was treated with scorn by those working in the business.

Commenters to Hold The Front Page, the website that services the regional and local sector, are never the most cheery, perhaps understandably so. But their greeting of the Monty news was miserable in the extreme.

It's true that he has a fearsome reputation as an intransigent cost-cutter, both in the UK and across Europe, and is famous for not changing tack.

Will Montgomery be as radical as he has claimed?

Can he make it work or will he just cut costs even more, make his money and clear off? Or will he try to be as radical as he has claimed – and as the industry so desperately needs?

First, the industry needs Montgomery, the Local World chairman, and his chief executive Steve Auckland, to bring new meaning to innovation and risk-taking – two factors that have never been evident in the long history of regional and local newspapers.

They have an opportunity to show others what might have been. And they have to be flag-bearers for an industry that has largely been a model, in a gross generalisation, of conservatism throughout its history.

Second, what actually is Local World and what is it attempting to be? Montgomery was ambitious in his opening salvo in November 2012. His main statement is worth repeating. (It will either come back to haunt him – or it will prove to be a remarkable legacy of foresight). He said:

"This is an entirely new type of media business. The value of Local World will lie in its people, its franchises and its IP. It will be unencumbered by the infrastructure of the industrial past such as property, printing presses and large-scale distribution or any legacy issues such as high levels of debt. Local World signals the fight back in Britain's regional media industry."

And he was right. Local World is a new type of media business, and he found two good partners in Northcliffe and Iliffe through which to launch it.

Of all the main established major players, Northcliffe was always best placed to lead in such a venture for one simple reason – lack of debt. And that's also true of Iliffe, having been a carefully husbanded family-owned group since the 1980s.

Northcliffe's parent, DMGT, and its ultimate proprietor, Lord Rothermere, will always regret the deal they rejected in 2006 when they were rumoured to have been offered £1.1bn by Gannett for the group; they believed they could get at least £100m more.

That's ironic because it is £100m that the group was valued at in the deal with Local World. The six years since the aborted sale have been painful but at least DMGT has given its regional wing a chance to find a new route.

Why revenues do not have to be so aggressive

Clearly, DMGT had fallen out of love with Northcliffe – and, in fact, a not-so-close look at DMGT's annual reports shows that traditional news itself (including the Daily Mail and Mail Online) is playing an increasingly smaller role (though still significant) in the group as a whole.

As Local World starts its life, it's what it hasn't got that is the most fascinating, which Montgomery highlighted at the launch. It hasn't got the debt; it has very little capital equipment of its own (printing presses, these days, are only good if someone else owns them); its freehold property portfolio will be quite small; and it hasn't got City-based shareholders breathing down its neck – all the encumbrances that have held back many of other groups.

Montgomery and Auckland are long enough in their respective teeth to understand the task at hand. Local World will have to take a longer term view, and the principal investors, DMGT and Yattendon (former owners of Iliffe), must surely appreciate that this is the only route they can take.

Costs will be lower, which means that revenues do not have to be as aggressive as before. With this foundation Local World, and its stable of 18 daily products, including two Metros, 76 paid-for and free weeklies and 400-plus websites can undertake the kind of innovation that other groups failed to do over the past 20 years.

It can try different models of pricing and frequency; it can advance the case for further consolidation; it can experiment; it can take risks. But will it do so? The signs, so far, are good.

Auckland, in a previous life, drove the Metro to massive success at a time when all the considered opinion was that a free daily could not work. Northcliffe's formerly disastrous websites have already been refashioned with a greater emphasis on local news on their home pages.

The group has announced that its three businesses in Derby, Cambridge and Exeter will be "fast-track" centres that will spearhead what it has named its "transformation project" as it looks to overhaul content.

Political parties suffer from media business myopia

But what about the doubters? And what about the government and its agencies, the Competition Commission and the Office of Fair Trading (OFT); those who work for Local World; and those who work in the rest of the industry?

The government did not make a good start. The OFT weighed in in January when it announced that it was investigating whether the creation of the new business would lead to any lessening of competition within any markets. The deal was finally cleared in June.

But all the political parties continue to maintain their long-standing myopia to what is the real media issue of our times, the future funding of news. And what of the staff?

Are they ready for yet more disruption and the job losses that must surely come? They will feel battered but they must see this as a real opportunity. It's not quite the fabled last-chance saloon for some of them, but it is heading that way.

They need to understand that the new model will never be like the old one. By the middle of 2013 it had been a tough start for some.

Jobs had gone; Montgomery's vision of journalist harvesters, proffered to MPs, didn't go down too well and had to be clarified by Auckland before Auckland himself outlined some scarily ambitious targets for Local World websites at a media conference in the late spring while changing editors around the country and continuing to look for consolidation of skills.

And, finally, what about the peers within the sector? Trinity Mirror has shown willing by taking a 20% stake. Will it, and others such as Johnston and Newsquest, take on the government by forcing through swaps and further consolidation? They need to.

Will the Tindles and co work with the new group? They need to, too. But it comes down to one hope and one fear. The hope is that Local World will be radical and will take risks. The fear is that is will not be and that it won't. It is in your hands, Mr Montgomery and Mr Auckland.

Tomorrow: John Meehan, former regional editor, on sustaining community journalism

*What do we mean by local? The rise, fall – and possible rise again – of local journalism is edited by John Mair, Richard Lance Keeble and Neil Fowler. To be published 1 September by Abramis at £19.95. Special offer to Guardian readers, £15, from richard@arimapublishing.co.uk